Apple Gets This 'Massive Sum' From Google To Be The Default Search Engine On iOS

Apple Inc. AAPL has a less-discussed revenue source that is fetching it multi-billion dollars in revenues annually.

Apple's Lucrative Google Partnership: Alphabet Inc. GOOGL GOOG is on track to pay about $15 billion to Apple, according to Bernstein analyst Toni Sacconaghi, Jr.

This payment pertains to Apple using Google as the default search engine on iOS.

In 2020, Google is likely to have paid Apple a whopping $10 billion for the same, the analyst said, citing recent disclosures in Apple's public filings and Bernstein's bottom-up analysis of Google's traffic acquisition costs payments.

Google's TAC payments to Apple have grown at a compounded annual growth rate of 40% between 2016 and 2020, Sacconaghi noted. This is higher than the 18% growth rate of Google's overall TAC.

This trend will likely continue, as Google's payments to distribution partners such as Apple and other search engine partnerships are growing faster than to its network members or the websites, the analyst said. Additionally, Apple's mobile web traffic share has increased substantially over the last five years.

Related Link: Why Regulatory Risk Is A Silver Lining For Apple And Google

Why It's Important: Google has come under the antitrust scanner due to the hefty annual payments it makes to Apple. The U.S. Department of Justice may require Apple to end its exclusive agreement with Google, thereby giving equal access to other search engines.

Apple is already embroiled in a legal battle with Epic Games regarding its App store fees.

In the interim, Apple has begun testing an in-house search technology, the FT reported late last year. With the iOS14, Cupertino has begun showing its own search results and linking directly to the website when users type queries from its home screen, the report added.

In premarket trading Wednesday, Apple shares were up 0.25% at $ 149.99 and Google was adding 0.24% to $2,832.00.

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Posted In: Analyst ColorNewsAnalyst RatingsTechMediaBernsteinJr.Toni Sacconaghi
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